Medicare Part D Competition Continues to Hold Down Premiums

2013 Premiums Are 48 Percent Below CBO’s Initial Estimate

      by Christina Sochacki R.N., J.D.

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Washington, D.C., August 8, 2012 – Secretary Sibelius reported Monday that, for the third consecutive year, average basic premiums for Medicare prescription drug plans are projected to remain constant.[1] According to calculations by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary, the average 2013 monthly premium for basic prescription drug coverage is expected to be $30 - 50 percent less than originally projected in 2004.


The Medicare prescription drug plans are under Part D, a voluntary outpatient prescription drug benefit, delivered by private drug plans and Medicare Advantage plans. The Part D program established a competitive market for prescription drug plans (“PDPs”) and has been hugely successful in controlling costs. In fact, Part D benefit costs have come in well under initial projections. Since its implementation, Part D has cost taxpayers 43 percent[2] less than originally projected. Medicare will save $217.8 billion (32.9%) from 2006-2013, compared to 2004 projections[3], and average 2013 plan premiums are 48% lower than initially projected.

While Medicare costs have been soaring, Part D premiums have held steady annually. Beneficiary premiums have been stable for the last three years—a degree of restraint unheard of in this era of health cost growth. Seniors and the disabled are reaping the benefits of Medicare Part D. Nearly 40 million people with Medicare, 90 percent of all beneficiaries, have the option of affordable, quality, comprehensive drug coverage. Additionally, a Journal of the American Medical Association (JAMA) study found that adherence to medicines through Part D’s medication therapy management program saves Medicare approximately $1,200 per beneficiary in hospital, skilled nursing facility and other health care costs.

Far from being a source of inefficiency and waste, Part D sets the standard for Medicare reform, delivering better value at lower cost.

Source: Congressional Budget Office (2004), HHS, and the Council for Affordable Health Coverage

– Christina Sochacki, R.N., J.D. is the Vice President of Legal and Government Affairs at the Council for Affordable Health Coverage (www.cahc.net)

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[1] “Medicare prescription drug premiums to remain steady for third straight year”, Press Release, Aug. 6, 2012.  Available at: http://www.hhs.gov/news/press/2012pres/08/20120806b.html.

[2] Calculated using 2011 cost reports.

[3] CBO, “A Detailed Description of CBO’s Cost Estimate for the Medicare Prescription Drug Benefit,” July 2004 (Initial beneficiary premiums projected at $131 billion for the 2006-2013 period).